Jacksonville.com: Gate tycoon reveals self, business secrets 7/20/97

Sunday, July 20, 1997Story last updated at 11:17 p.m. on Saturday, July 19, 1997

Gate Petroleum owner Herb Peyton on the dock behind his home on the St. Johns River.- Stuart Tannehill/staffGate tycoon reveals self, business secrets

By John Finotti

Times-Union business writer

Of Jacksonville's many fascinating business tales, one of the most intriguing is that of a Kentucky outsider named Herbert H. Peyton who took a Northside gas station, built it into a nearly half-billion dollar empire, and overthrew the Ortega aristocracy in the process.

But it's a story the publicityshy Peyton has been unwilling to share with the public. Until now.

The man who went from pumping gasoline at his first Gate Petroleum service station on Moncrief Road to owning the prestigious Ponte Vedra Inn & Club has published his autobiography, aptly titled Newboy.

In his self-published book, due out tomorrow, and in a rare interview in his Mandarin office last week, Peyton, using earthy language, recounts his risky, high-profile acquisitions, brushes with the law and insights into his motivations and personality.

''I'm 65 years old,'' he said. ''I've liked reading books and writing and just thought it was an interesting story.''

Peyton lays out in detail his early years of moving from city to city with his parents and two siblings: He's an average student. He loves sports and the outdoors. His father cares mostly about himself.

A risk-taker from an early age, a teenage Peyton, his older brother, Gaines, and two friends built a raft with stolen lumber and floated down three rivers from Kentucky to New Orleans. Newspapers around the country, including The Florida Times-Union, ran stories about the modern-day Huck Finns.

A fitness and outdoors fanatic, Peyton writes at length about his training regime (each week he runs 15 to 20

miles and swims a mile in the ocean), triathlons and wilderness adventures, including one frightening river trip mishap that almost killed his son.

However, Peyton doesn't even mention his first two marriages, from which he has three children, John and Hill, who work in the company, and Jennifer, an artist in New York. Peyton and his third wife, Marcy, who is 28 years his junior, have two preschoolers.

Peyton also quickly dismisses any guilt in a Justice Department probe of gasoline price-fixing in the late 1970s that threatened to send him to jail. Gate pleaded no contest and paid $90,000 to settle the charges.

But it's Peyton's heretofore untold revelations about megaacquisitions and the spectacular rise of Gate Petroleum that provide the most interesting insights.

After all, Gate has acquired vast tracts of prime real estate, including the now-booming office park corridor at the intersection of Butler and Southside boulevards, the former Gulf Life tower on the Southbank and half of Blount Island.

Gate also owns and operates 150 gas and convenience stores, a concrete plant, and four clubs: Epping Forest, Deerwood, The Lodge at Ponte Vedra and the Ponte Vedra Inn & Club.

Last fiscal year, ended June 30, Gate Petroleum posted revenues of $420 million. Revenues are expected to hit $500 million this fiscal year, Peyton said. The company has more than 3,000 employees.

So how does a guy with one gas station in a rough-and-tumble part of town amass such a conglomerate?

Peyton, who'd had a gun held to his head during one robbery and was shot at during another, did it by using some crafty financing, a willingness to take big risks and a fair bit of luck.

In 1960, after working for Billups Petroleum for several years, Peyton used $18,000 in savings to open his first gas station on Moncrief Road.

Early on, Peyton recognized that he could build more gas stations by using a technique he refers to as ''negative float.'' Typically, Gate sold gasoline one or two days after it arrived at the service station, but had 10 days in which to pay the supplier. In other words, Gate had use of the supplier's money. The more stations Gate opened, the greater the amount of money.

Ironically, it was the energy crisis in 1973 that sparked Gate's first non-gas station acquisition. Limited gasoline supplies meant Gate couldn't build more stations. However, record gasoline prices produced huge profits. If Gate didn't reinvest the profits, it would face stiff tax bills.

So, the company bought a 500-acre potato farm in Hastings. The farm and a subsequent purchase of a cement factory proved profitable.

In another deal, Gate paid $17 million for half of Blount Island. Peyton now has a deal to sell it to the Marine Corps for $100 million.

One asset Peyton remains adamant about not selling at any price is Ponte Vedra Inn & Club, a 325-acre golf resort. Ever since he first saw the club as a high schooler, Peyton said, he's been overwhelmed by its ''beauty and elegance.''

Ownership of the exclusive club is also Peyton's way of letting former classmates at Fletcher High School and the Ortega crowd see just how far he has come.

Peyton said he's turned down numerous offers for the club, including a late-1980s offer from a Japanese investor in the neighborhood of $100 million.

In contradictory fashion, Peyton levels his most blistering comments at the very folks who helped him acquire his prized assets: Jacksonville's bankers.

''They're bloodsuckers,'' he said.

Isn't Peyton worried that his inflammatory comments might draw the ire of his bankers? After all, Gate Petroleum's bank debt now stands at a staggering $100 million, the highest level in the company's history.

''Listen, I'm 65 years old. I don't care anymore,'' he said. ''Everybody bows and scrapes to them, caters to them, because they've got to. But nobody has ever told the bankers the truth.''

Peyton was particularly incensed when he discovered that unbeknownst to Gate Petroleum, a local bank was collecting an extra five days of interest each year on a loan.

He writes: ''I have never begrudged bankers the interest we had agreed to pay. I deeply resent the additional money they try to trick us out of.''

Peyton also zings Jacksonville's old guard.

It's his contention that Jacksonville didn't grow like other parts of Florida because the monied families weren't willing to provide the seed money for new enterprises. It's been newcomers like himself who have taken risks and helped move the city forward.

Yet, after all he's accomplished he still seems insecure about his place in Jacksonville.

''I've never been in that set,'' Peyton said of the Ortega crowd. ''I just didn't fit in that group.

''And there is a feeling, as I said in the book, that when Gate started buying these assets . . . that it was all funny. But after a while it wasn't funny because Gate got all of the best assets in Northeast Florida.''

But whether he intended it or not, as he now stands on the dock behind his sprawling Mandarin riverfront estate, Jacksonville's ''newboy'' looks every bit the old boy.

Peyton's book goes on sale tomorrow at selected area bookstores, the gift shop at the Ponte Vedra Inn & Club and all Gate Food Posts. Cost is $18.95. Proceeds will be donated to the Jacksonville Police Athletic League and The Ronald McDonald House.